Euro soars past $1.30

17 July 2010

The Euro continues its remarkable rebound against the dollar following a long-term low of $1.1876 in early June. Since that point, the Euro has bounced nearly 11 pips in about six weeks to a current rate of $1.2935.

One Euro actually had exchange rates as high as $1.3009 in late European trade before opening in New York with a pullback. Since that early June low, which coincided with the pinnacle of fear regarding the European credit crisis, conditions in the US have become less uncertain thanks to ongoing unemployment and housing issues.

Portugal, Spain and Greece were among the major European Union economies facing severe credit problems before the Union members, led by Germany, got together to offer assistance programs to help Greece stave off bankruptcy. The unified effort of member countries to support the Euro showcased a major benefit of a diversified membership sharing a single currency.

Despite the ongoing struggles of many European economies, the show of support helped ease fear of worst case scenario speculation that helped lead to the major fall in the value of the Euro. This helped contribute to a correction from the June low in the Euro, which gained steam as optimism about the US recovery began to wane.

Unemployment remains the major concern for the US economy as businesses remain hesitant to add jobs, which has kept unemployment near ten per cent. This contributed to the June drop in consumer confidence, when the index reading was 10 points lower than the May report. Housing is also posing concerns at the moment as recent numbers suggest a fall of in real estate after the expiration of home tax buyer credits.

Nowhere is the emotional volatility of financial speculation more evident than it is in currency trading. One of the most anticipatory trading environments, currency tend to move quickly when speculators sense market factors are likely to affect the level of interest in particular currencies. This is also why reversals can be equally quick, as has been the case with the major Euro bounce in the last month and a half.

The $1.25-$1.35 is an important long-term range for the Euro. The break below $1.25 was significant in the Euro’s fall off in late April in May. Now, that level provides support, while the $1.35 level is the next significant area of resistance of the upward mobility for the Euro is going to continue.

While technical traders are watching these key technical marks, fundamental speculators are watching a market move swiftly with daily changes in sentiment in either Europe or the US. If interest rates remain low in the US to give the economy more time to recover, the Euro could continue to flourish. However, any significant sign of improving conditions in the US could lead to another fast drop for the Euro.